By Mike Dolan
London (Reuters) – Morning offers US
What is important nowadays in the US and the World Markets
By Mike Dolan, editor-in-large, financial sector and financial markets
The wilting share sales of Wall St has now wiped out almost all profit after the elections and the risks of a momentum -controlled route, unless there is any change in the dark economic image or the uncertain US government policy attitude.
While looking at this shocking photo that unfolds on the American markets, today I look at the restart of European Defense expenditure and the extent to which it can sow a new round of joint loans through countries of the European Union.
Find this and more on the Wall Street -Rout below.
Today’s market
* The rates of President Donald Trump have made investors, with the fear of an economic decline that drives a stock marketsell-off that $ 4 trillion has devoted $ 4 trillion from the Peaklast month of the S&P 500. * An important economic adviser from President Donald Trump, even then an administration of uncertainty, even talked about recession of the uncertainty, even about the recession of uncertainty, the Tarief of Uncertainty, even the recession of the uncertainty, the Tarief Policy, even about the recession of uncertainty, as an impression of the uncertainty, the Tarief Policy, the Tarief Policy, even about the recession of uncertainty, as an overview of uncertainty, as an overview of uncertainty, the Tarief Policy, the Tarief Policy, the Tarief Policy, the Tarief. showed that consumers grew more pessimistic about their prospects. * The greens of Germany promised to block plans for a massive entry into borrowing the state to renew the military andrevive growth of Germany, but they also made rival proposals through compromise on Monday. * Ukraine -President Volodymyr Zelenskiy met Saudi crown prince Mohammed bin Salman prior to conversations between Ukrainian Andu.s. Civil servants who Washington hopes will deliver substantial progress to end the Russian war with Ukraine. * US President Donald Trump wants to build metal refining facilities on Pentagon military bases as part of his plan to strengthen the domestic production of critical minerals and offsetchina’s control over the sector, two senior administration officers told Reuters.
The epic swimming of the market
The milestones in the American market reverse were piled up on Monday.
The 2.7% plunge of the S&P 500 marked the worst day of the year, because it closed for the first time since 2023 under its 200 -day advancing average.
The fall in Tesla stood out in some stock movements. The automatic giant has now lost more than 50% of its value since he peaked in December.
Perhaps as disturbing as the movements in shares, the disruption on the credit market, with borrowing Premia for American corporate corporate bonds that have been increasing to the widest level versus American treasury since September.
There was no clear new trigger behind the DIA on Monday apart from the continuous trade rate of uncertainty and the mitigating job market, in which President Donald Trump and administrative officers acknowledged that an economic decline in the first quarter was a risk.
The newest consumer research of the New York Federal Reserve emphasized growing concerns about the deterioration of financial situations of households. And the percentage of those who expect unemployment to be one year higher rose from now on the highest level since September 2023.
Although the FED has made it clear that the interest rates will be in the near future, an edge for safety in treasuries saw two years of returns their lowest point since October, and traders pushed 2025 FED Bets to 85 basic points.
The dollar also slid on Tuesday to another layer 2025.
While large investment banks rather reduced ‘overweight’ stock recommendations of the US, fear spread throughout the world. The All-Country stock index of the MSCI is now also negative for the year.
However, stockfutures and overseas bourses were early on Tuesday with a small win.
Now let’s look deeper into some potential game changing shifts that take place in Europe.
The start of the Euro defense bands?
The newest joint loan plan from the European Union is probably just a fraction of what will be needed to defend the continent, as a result of which some ask if the dawn of defense bands will be the next major extension of EU-wide loans.
For global investors who want to re-balance their investment portfolios outside an increasingly isolationist United States, the development of a supranational sovereign debt pool in Europe is now intriguing.
Further development of joint EU lenses that go beyond the new post -buildings “Next Generation” recovery funds – reserved as just over 800 billion euros ($ 866.88 billion) in total – the size of this Pole would be far beyond 1 trillion euros, near the domestic government debt heavens heavenweights.
Last week, European leaders supported plans to spend more on Defense and to be at Ukraine in a world that is being lifted by the reform of American military and trading alliances by President Donald Trump. But the proposed 150 billion euros to jointly borrowed EU loans seemed shy for estimates for what would be needed in common financing.
“Von der Leyen’s 150 billion euros in loans is a first step, but it is unlikely,” says Carsten Nickel, deputy research director at consulting firm Teneo, referring to the European Commission President Ursula von der Leyen.
Nikkel believes that parallel losing of the euro budget rules to allow greater defense expenditure, the continent so far would get alone, because military expenditures would still compete with other domestic priorities.
What is more, Eastern European countries can have to bear more the responsibilities of the defense to protect the entire block only because of their proximity of Russia. They can therefore demand joint financing to share the burden.
Joint borrowing can also be the cheaper path. Although Benchmark AAA revenues on existing 10-year EU-wide debt have risen to more than 3.1%in the past week, the costs of funds supported by the EU remain lower than in most of the EU, apart from Germany, the Netherlands and the Nordic EU countries.
Nuclear umbrella
It is intriguing that Nikkel also connects the pressure for shared EU defense spending with the French proposal last week to offer a “nuclear umbrella” for EU safety.
“French nuclear protection would probably be financial and political costs for his beneficiaries, especially Germany,” he wrote. “This could give Macron (French President Emmanuel) the opportunity to demand joint EU lenses in exchange, at least for military purposes – a great political victory that could also sell at home well.”
This step can also offer the new German government the coverage it needs to set aside remaining objections to joint loans. And if the urgency that is shown in Berlin last week to increase his own defense budget is an indication, another significant expansion of joint EU bonds may be good.
How much is the only real question.
If necessary, the EU sees 500 billion euros in investments in the following decade. But increasing the expenditure for defense to 3% of the output would also require almost 200 billion euros per year.
The Bruegel -think tank in Brussels thinks that the new reality means an increase in annual defense expenditure by 250 billion euros to around 3.5% of GDP in the short term, and they suggested that half would be financed at EU level. That would be about 625 billion in new jointly issued EU bonds be sold by 2030.
The Center for European Reform said last month that bond issue for defense was feasible and had many advantages. In particular, they noted that a 500 billion euros fund would generate an annual interest rate of less than 20 billion euros in the current returns.
“Because everyone would be on the hook to pay back the debt, it can also reduce countries that release the defense possibilities of rapidly exciting peers such as Poland,” it said.
What is more, are European debts, in total, much lower than those in the United States and Japan, so the AAA rating for EU defense bands can look safer.
The expansion of EU -fair loans can offer comfort to Nervy Global Investors, even while the military imperatives that float many keep them sharp. And if another round of debt ceiling argues and sees the American sovereign rating under renewed pressure, alternatives can look even more attractive.
Graph of the day
Although many investors had expected Donald Trump’s election profit in November to unleash another belly of the stock market with tax cuts and deregulation, the megacaps that have led the market in recent years have already reversed their profit after the elections. Tesla remains the striking in this respect and loses more than 50% of the December peak.
Today’s events to watch
* US NFIB February Small Business Survey, January Joltsjob Openings * Ministers of the European Union meet in Brussels, with vice-president Luis de Guindos of the Central Bank Vice-President Luis de Guindos
The expression of opinions are that of the author. They do not reflect the views of Reuters News, who, under the trust principles, are committed to integrity, independence and freedom of bias.
($ 1 = 0.9228 euros)
(By Mike Dolan; adaptation by Anna Szymanski)
